ECB stimulus helps prevent deflation: Praet

FriedrichGeiger

BERLIN--Executive Board member Peter Praet has defended the European Central Bank's asset purchases, saying in an opinion piece for a German newspaper that they help to prevent risky deflation and support the economy.

In the article published Wednesday by Sueddeutsche Zeitung, Mr. Praet said the ECB should stick to its inflation target of just below 2% because a change would damage the central bank's credibility.

If inflation is low longer term, the buffer to deflation is small, noted the economist. Expectations of falling prices delay purchases and investments, said Mr. Praet. And a central bank can lose control over real interest rates in case of deflation, he added.

The ECB's asset purchases have lowered financing costs for companies and households, the executive noted. These positive effects were larger in countries where the transmission of monetary policy had been impaired temporarily, according to Mr. Praet.

The asset purchases have an impact on longer-term interest rates, which are particularly important for investments and purchases of durable consumer goods, said Mr. Praet in the text published by Sueddeutsche Zeitung.

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